J.P. Morgan's cross-asset team remains optimistic about risky assets and continues to expect cyclical stocks to lead the market. Global market chief strategist Marko Kolanovic said in a research report that they insisted on drastically increasing their holdings of stocks and commodities while drastically reducing their holdings of bonds.

Kolanovic said, “As the pace of central bank policy normalization was repriced, bond yields rose at the beginning of this year, but we think there is room for further increases in yields. Higher yields support our call to rotate cyclical and value assets because they reflect the strong growth and inflationary impulses that policymakers are dealing with. However, we believe that only a further sharp increase in interest rates will have a significant adverse impact on the overall stock market.”

The analyst added that as the rotation from growth and defense to cyclical/value stocks continues, as long as the Fed's interest rate hike cycle is still gradual, it is expected that there will be no problems with the Fed's rate hike cycle.

Kolanovic said, “We are optimistic about small and medium-sized stocks. With a strong macro outlook, this is a fertile ground for obtaining alpha opportunities. We anticipate that if the severity of the COVID-19 pandemic abates somewhat, small and medium-sized stocks will soon experience strong growth in 2022.”